Foreign Liquefied Natural Gas

In this four-part special series, KPBS investigative reporter Amita Sharma and border reporter Amy Isackson examine how San Diego-based Sempra Energy got the green light to build the liquefied natural gas terminal in Ensenada. They look at the potential health and environmental consequences of burning hotter natural gas on appliances, and explain why regulators didn’t require more environmental study of the effects of imported liquefied natural gas. Finally, they'll tell us the current state of the natural gas market.

Part 1: Sempra's LNG Plant Fuels Controversy

Mexico's President and the CEO of the San Diego energy company Sempra tout Sempra's new liquified natural gas plant as a new clean energy source for Baja and Southern California. The plant sits just north of Ensenada, on what was the last stretch of pristine coastline between that city and Los Angeles. The plant has fueled concern that Mexico and Sempra have gambled on LNG to the detriment of the region. KPBS Border Reporter Amy Isackson brings us the first report of four on liquefied natural gas.

Hundreds of guests stood just a few hundred yards from the Pacific Ocean.

Sempra plans to sell the rest across the border. (View PDF map of Sempra's gas supply) Though, it doesn't have any customers yet.

Donald Felsinger - he's Sempra's CEO - told guests the facility is good for the region.

Donald Felsinger: So today, not only is the air cleaner, but the future is brighter.

Lawyers and environmentalists on both sides of the border fought Sempra's plant for years.

They lost. But lawsuits are pending.

For 25 years, the land where Sempra built was zoned for tourism and homes.

But, when Sempra filed for permits, the Mexican government changed the rules.

Carla Garcia is an environmental attorney in Tijuana.

She says, what's more, until Sempra's proposal, Mexico didn't have any LNG laws.

She imagines the conversation.

Carla Garcia: I think it was something like, you don't have a law? You need standards? We have these. And, suddenly, magically, there was a law that was approved. It was one of the fastest Mexican official norms ever passed.

In California, strict rules have blocked LNG terminals from being built.

So has community opposition. People worry about safety. And they don't want the country to become dependent on yet another foreign fossil fuel.

Critics of Sempra's plant share those concerns.

They say a spill at the plant could create a highly flammable gas cloud. They say computer models show it could spread to a residential community a few miles away.

Part 2. Sempra's Plan to Import Liquefied Gas Raises Health Concerns

Southern California has some of the dirtiest air in the country. And air quality monitors say if San Diego-based Sempra Energy moves ahead with plans to import liquefied natural gas, the air will be even more polluted. They say public health and the environment are at risk. In the second of KPBS’s four-part series on the effects of Sempra’s push to bring in foreign natural gas, Reporter Amita Sharma has more.

If you live in San Diego, you may not think about it but much of your everyday life is driven by natural gas.

It fuels two thirds of our transit buses.

It powers gas stoves in homes so we can cook, heats our water so we can bathe and warms up our swimming pools.

Natural gas has been used in the Southland for decades because it is cleaner…it creates fewer smog forming and toxic emissions when burned than other fossil fuels. But not all natural gas is created equal.

Next year, Sempra Energy plans to pipe into the region natural gas from Indonesia and the Middle East through its new Mexican terminal called Costa Azul. Here’s how: The gas will be chilled into liquefied natural gas, shipped in on tankers and then be reheated at Costa Azul and moved into the San Diego market.

This foreign natural gas burns hotter and dirtier.

Atwood: Tests already done by the natural gas industry in California have shown the use of this so-called hot gas increases the pollution up to a doubling of the emissions in a variety of appliances in which it’s used.

Sam Atwood is with the Southern California Air Quality Management District. His agency and Sempra’s own experts estimate burning the hotter gas on home appliances alone could release into the air an additional 1-point-two tons of nitrogen oxide each day. Nitrogen oxide is a building block for the region’s two worst air pollutants… ozone and fine particles.

Atwood: They’re associated with increases in respiratory symptoms, increases in hospital and doctor’s visits, and fine particles are associated with slowed lung growth in children.

Jean Ospital is AQMD’s health expert.

Ospital: Asthma symptoms can be worse. You can have premature deaths with fine particles as well as with ozone.

Unlike Orange, Riverside and Los Angeles counties, all of the natural gas consumed in this county will be the hotter imported Liquefied Natural Gas, according to the California Energy Commission. That’s because once, the LNG reaches other parts of Southern California, it will be blended with cooler gas coming from sources elsewhere in the United States. Bill Powers is a local consulting engineer.

Powers: San Diego County is ground zero in terms of air quality impacts of hot LNG 100 percent of the gas in our pipelines in San Diego would be this hot LNG and would carry with it additional nitrogen oxide emissions that would come from the hotter gas.

And that is a major setback for clean air here according to Steve Moore at San Diego County Air Pollution Control District. The region has already run afoul of two federal rules on ozone.

Moore: That’s fairly significant -- we’re very close to attaining one of the eight-hour federal ozone standards. In our view any increase is counterproductive.

Not so say Sempra’s own experts. In testimony before state regulators, they didn’t dispute that hotter gas will increase nitrogen oxide… emissions. They just didn’t think the emissions would be significant. Sempra would not agree to a taped interview as others did for this piece. KPBS submitted written questions to the company and received written responses. Sempra PR manager Denise King said any LNG the company imports will have to meet the gas quality specifications established by the California Public Utilities Commission.

Two years ago, the commission decided to allow the hotter gas by changing its rules….despite objections from the agencies that monitor air quality.

Again, the AQMD’s Atwood.

Atwood: We tried long and hard to convince the Public Utility Commissioners without any results that this was not a good direction to go for the public health of millions and millions of Californians.

Tomorrow, we’ll explore how that happened in part III of our series.

Amita Sharma, KPBS News.

Part 3. Regulators Resist Environmental Review of Importing LNG

San Diego and most of Southern California already violate federal clean air standards. Agencies responsible for monitoring air quality fear Sempra’s plan to import liquefied natural gas from overseas will increase pollution and jeopardize public health. They want an environmental review but so far regulators have resisted. KPBS Reporter Amita Sharma has more.

Next spring, Sempra Energy plans to import foreign liquefied natural gas through its new Mexican terminal in Baja California. The gas could be piped north to San Diego. This LNG from overseas tends to burn hotter on residential and commercial appliances like water heaters and large boilers.

Atwood: We’re still basically the most polluted region in the United States for ozone and for fine particulates.

Sam Atwood is with the Southern California Air Quality Management District.

Atwood: The bottom line is this higher heat content means is that it results in more air pollution when it is burned. It can exacerbate existing heart and lung conditions and then there are many long-term effects that include a greatly increased number of premature deaths.

So how did Sempra get the green light from state regulators to import hotter burning natural gas when air quality agencies worry about the health hazard?

Environmentalists say the answer lies in part with the mindset at the California Public Utilities Commission two years ago. That’s when commissioners voted to allow the hotter gas by getting rid of a rule that required new gas entering California pipelines to have the same heat value as existing gas in the system. San Diego consulting engineer Bill Powers says at the time, the commission’s main focus was to reduce the state’s dependence on coal power.

Powers: It’s almost as if the PUC is frozen in time back when if it’s not coal it’s good and once you embrace that philosophy, it puts you in a defensive posture from then on out if it turns out there are some downsides to LNG that really weren’t perceived to be relevant at the time.

Air quality agencies were concerned about exactly those downsides and wanted more study. But the PUC refused. PUC engineer Belinda Gatti says an environmental review was unnecessary. Rather than an independent evaluation, the PUC appears to have relied on research done by Sempra subsidiary So Cal Gas. Gatti says the company’s trial run of liquefied natural gas from Qatar in May showed no major increase in emissions.

Gatti: Everything seems to have been working fine and as far as the information that we’ve been getting, there have been no changes.

Gatti refused to provide a copy of those test results saying they were confidential. She referred the request to a Sempra lobbyist in San Francisco who did not calls. Sempra PR manager Denise King says the field verification testing in May makes clear that previous concerns over likely emission impacts are vastly overstated…but again doesn’t say what the results were. A So Cal gas representative said the tests were still being evaluated.

One person who is familiar with those tests is Steve Moore at the San Diego County’s Air Pollution Control District.

Moore: I don’t think that those results are necessarily representative of the full extent of the potential emission impacts from the use of LNG as a fuel in San Diego County.

The Air Quality Management District and the city of San Diego sued the PUC to force an environmental review. The California Supreme Court declined to hear the case. Now the AQMD has filed a complaint with the Federal Energy Regulatory Commission asking it to do an environmental report. The AQMD’s Atwood says if such a review finds the effects of LNG to be detrimental, Sempra should have to treat the gas before allowing it to flow into Southern California.

Atwood: We’re not proposing that natural gas be required to be much cleaner than it is. It’s already a clean fuel. All that we’re asking is that natural gas not become a dirtier fuel than it is today.

Part 4. The Cost of Importing Liquefied Natural Gas

Sempra Energy begins to import foreign liquefied natural gas next year. Foreign lng costs more than domestic natural gas. Sempra says price should not be the only consideration. This week California regulators will decide how much price matters. KPBS Reporter Amita Sharma has more.

To Sempra, spending one billion dollars to build a new liquefied natural gas terminal in Mexico was visionary.

Sempra projections show domestic natural gas supplies will run out…while American demand will rise. Under that scenario, American utilities would be forced to import liquefied natural gas through terminals like the one near Ensenada.

Sempra’s prediction and the reality do not match. In fact, the United States is in the middle of a natural gas boom.

Price: The growth in the domestic natural gas market is almost astonishing.

Tom Price is a vice president with Chesapeake Energy Corporation….one of the country’s largest natural gas producers. He says the surge is driven mostly by advances in technology.

Price: It has absolutely revolutionized the drilling of natural gas in the United states.

Jamie Webster of CFE Energy says the new technology can now free up gas deep within large shale beds.

Webster: You’ve seen some real growth in Texas with the Barnet Shale, all up in the Rockies and over the next couple of years we’ll see some more production in the Haynesville Shale which is in Louisiana and the Marcella Shale which is in the northeast.

At the same time, Webster says there’s been a dramatic increase in demand for natural gas in Asia where countries import as much as 90 percent of what they need and they’re willing to pay three times as much for the fuel.

Webster: I have seen prices as high as $22 per million but while out there in California right now, wholesale gas prices are around 6,7,8 dollars.”

It’s against this market backdrop that Sempra subsidiaries So Cal Gas and SDG&E say price should not be the primary consideration in whether utilities should enter into long-term contracts for LNG.

But what if price weren’t the top factor?

Powers: What it means is that the consumer would be paying considerably more for natural gas than they would otherwise and that it would be a completely voluntary move.

Bill Powers is a local consulting engineer and a member of the Ratepayers for Affordable Clean Energy coalition.

Powers: At this time in California, money is tight. We have ample domestic natural gas. It’s demonstrably cheaper and we have a private company that rolled the dice, built a huge terminal in Baja California under the presumption that in a few years when it was ready, lng would be less expensive than domestic gas. They bet wrong. In fact, they bet dramatically wrong.

Navigant Consulting Firm doesn’t agree. It put out a study this summer showing there is every reason to believe that the current price structure will continue … Again, Chesapeake Energy’s Tom Price.

Price: We believe we have about 120 years worth of natural gas reserves at the current consumption levels. It is a complete game changer.

Environmentalists say price is not the only problem with natural gas from abroad. They say that simply transporting the gas from other countries to Sempra’s facility south of the border will increase greenhouse gas emissions. And since foreign gas burns hotter in appliances and releases more nitrogen oxide, that will undercut the state’s goal of reducing emissions 25 percent by 2020.